Editas Medicine (EDIT) is an American clinical-stage biotechnology company that is focused on developing therapies based on CRISPR gene-editing technology. The company has facilities in Boulder, Colorado, and is headquartered in Cambridge, Massachusetts.
I am neutral on Editas Medicine. Its support from Wall Street analysts and massive upside relative to its consensus price target are offset by its lack of profitability and no clear short-term path to meaningful growth or profitability. (See Analysts’ Top Stocks on TipRanks)
Strengths
Editas was originally known as Gengine Inc. In 2015, the company formed a strategic partnership with Juno Therapeutics to capitalize on its experience in creating chimeric antigen receptors and T-cell receptors for cancer treatment.
On November 30th, 2018, the FDA permitted Editas to start the trial for its gene-editing techniques to treat Leber congenital amaurosis type 10, a rare eye disease that results in blindness.
In March 2020, the company was the first to use CRISPR in an attempt to edit the DNA inside a person’s body in partnership with Allergan.
Recent Results
In its third-quarter report of 2021, Editas Medicine reported a loss of $0.57, which was less than the consensus estimate loss of $0.86 per share. However, this is significantly worse than the positive $0.12 reported in the third quarter of 2020.
The company’s collaboration and R&D revenue amounted to $6.2 million in the third quarter of 2021, compared to the $62.8 million recorded in the previous quarter. The company’s top-line was able to marginally surpass the consensus estimate of $6 million.
The dramatic decrease in revenue was attributed to the recognition of previously deferred revenue in the third quarter of the previous year because of Editas’ termination of its strategic alliance with Allergan.
Q3 2021 also saw research and development expenses of $29.2 million, a decline of 13.8% year over year. The decrease was attributed to a one-time expense of $5 million for repurchasing the rights of EDIT-101 from Allergan.
In addition, the company also reported an 18.6% decrease in general and administrative expenses because of lower expenses of professional services.
As of yet, Editas does not have any completed product in its portfolio. Therefore, it is focusing on completing the development of projects in its pipelines.
Valuation Metrics
EDIT stock is very difficult to value as it is not profitable at the moment, trades at a very expensive price-to-sales multiple of 75.3x, and has no clear path to near-term profitability.
Wall Street’s Take
Turning to Wall Street, EDIT earns a Moderate Buy consensus rating based on two Buys and three Holds ratings assigned in the past three months. The average Editas Medicine price target of $55 puts the upside potential at 103.2%.
Summary and Conclusions
Editas Medicine operates in a very exciting and cutting-edge sector specializing in gene-editing technology. If its research and development efforts prove successful, it could make investors extremely large profits. On the other hand, if it fails to do so in a timely manner, shareholders will likely see large losses, if not a complete loss of their investment.
That said, Wall Street analysts appear to be quite bullish on the stock here, with the consensus price target implying massive upside for the share price over the next year.
Whether or not investors decide to go long here, they might want to keep in mind that the company remains highly speculative and is, therefore, a risky bet.
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Disclosure: At the time of publication, Samuel Smith did not have a position in any of the securities mentioned in this article.
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